Question 1

Suppose a friend gives you two pieces of gum, and you decide to have one piece now and save the other for tomorrow.You do this because:

Accepted Answer

A) the total utility you get from the two pieces of gum will be higher tomorrow. 
B) the marginal utility you get from the second piece will be higher tomorrow. 
C) the marginal utility you get from the second piece will be higher today. 
D) the marginal utility you get from the first piece will be less today. 
E) the total utility you get from the two pieces will be less tomorrow. 
A) the total utility you get from the two pieces of gum will be higher tomorrow. 
B) the marginal utility you get from the second piece will be higher tomorrow. 
C) the marginal utility you get from the second piece will be higher today. 
D) the marginal utility you get from the first piece will be less today. 
E) the total utility you get from the two pieces will be less tomorrow.

Question 2

If MUX / PX Y / PY then this consumer:

Accepted Answer

A) will buy less of X and more of Y. 
B) will buy more of X and more of Y. 
C) is in equilibrium. 
D) will buy more of X and less of Y. 
E) will buy less of X and less of Y. 
A) will buy less of X and more of Y. 
B) will buy more of X and more of Y. 
C) is in equilibrium. 
D) will buy more of X and less of Y. 
E) will buy less of X and less of Y.

Question 3

When marginal utility is negative, total utility is _____.

Accepted Answer

A) increasing 
B) at a minimum 
C) equal to zero 
D) decreasing 
E) at a maximum 
A) increasing 
B) at a minimum 
C) equal to zero 
D) decreasing 
E) at a maximum

Question 4

If a consumer is buying three goods A, B and C, then she will be in equilibrium when total utility from each good is equal.

Accepted Answer

A) True 
 B)False

Question 5

The equimarginal principle illustrates:

Accepted Answer

A) that consumers are essentially robots. 
B) that people behave irrationally. 
C) that people behave in rather consistent ways in order to maximize happiness. 
D) that people behave in rather inconsistent ways. 
E) that people will spend all their incomes. 
A) that consumers are essentially robots. 
B) that people behave irrationally. 
C) that people behave in rather consistent ways in order to maximize happiness. 
D) that people behave in rather inconsistent ways. 
E) that people will spend all their incomes.

Question 6

The theory of bounded rationality states that it is likely for consumers to have perfect information.

Accepted Answer

A) True 
 B)False

Question 7

The total utility of the consumer diminishes whenever:

Accepted Answer

A) he or she buys an additional unit of a good. 
B) his or her marginal utility decreases. 
C) his or her total utility increases at a decreasing rate. 
D) the last unit consumed of a particular good is distasteful or provides dissatisfaction. 
E) other consumers are also purchasing the product. 
A) he or she buys an additional unit of a good. 
B) his or her marginal utility decreases. 
C) his or her total utility increases at a decreasing rate. 
D) the last unit consumed of a particular good is distasteful or provides dissatisfaction. 
E) other consumers are also purchasing the product.

Question 8

According to utility theory, a consumer is in equilibrium when:

Accepted Answer

A) total income is spent. 
B) marginal utility per dollar spent for a good is maximized. 
C) total utility per unit of a good is maximized. 
D) total utility per dollar spent is equal for all goods. 
E) marginal utility per dollar spent is equal for all goods. 
A) total income is spent. 
B) marginal utility per dollar spent for a good is maximized. 
C) total utility per unit of a good is maximized. 
D) total utility per dollar spent is equal for all goods. 
E) marginal utility per dollar spent is equal for all goods.

Question 9

When the budget line is just tangent to the highest achievable indifference curve, then _____.

Accepted Answer

A) the consumer is in equilibrium 
B) the consumer should purchase more of good X 
C) the consumer should purchase more of good Y 
D) the consumer cannot afford the combination represented by the tangency point 
E) the consumer should purchase less of both goods 
A) the consumer is in equilibrium 
B) the consumer should purchase more of good X 
C) the consumer should purchase more of good Y 
D) the consumer cannot afford the combination represented by the tangency point 
E) the consumer should purchase less of both goods

Question 10

In order to maximize utility, consumers _____.

Accepted Answer

A) continue to make purchases until the marginal utility of each good is zero 
B) compare the marginal utilities of the last dollar spent on each good 
C) equate the total utilities of each good consumed 
D) continue to purchase a good until total utility is equal to zero 
E) will continue purchasing till diminishing marginal utility is not achieved 
A) continue to make purchases until the marginal utility of each good is zero 
B) compare the marginal utilities of the last dollar spent on each good 
C) equate the total utilities of each good consumed 
D) continue to purchase a good until total utility is equal to zero 
E) will continue purchasing till diminishing marginal utility is not achieved

Question 11

_____ is the change in total utility that occurs because one more unit of the good is consumed or acquired.

Accepted Answer

A) Total utility 
B) Marginal utility 
C) Disutility 
D) Diminishing marginal utility 
E) Expected utility 
A) Total utility 
B) Marginal utility 
C) Disutility 
D) Diminishing marginal utility 
E) Expected utility

Question 12

An increase in income _____.

Accepted Answer

A) makes the budget line flatter 
B) makes the budget line steeper 
C) makes the consumer worse off 
D) makes the consumer achieve a higher level of utility 
E) makes the consumer more selfish 
A) makes the budget line flatter 
B) makes the budget line steeper 
C) makes the consumer worse off 
D) makes the consumer achieve a higher level of utility 
E) makes the consumer more selfish

Exam 8: Consumer Choice

Suppose a friend gives you two pieces of gum, and you decide to have one piece now and save the other for tomorrow.You do this because:

If MUX / PX < MUY / PY then this consumer:

When marginal utility is negative, total utility is _____.

If a consumer is buying three goods A, B and C, then she will be in equilibrium when total utility from each good is equal.

The equimarginal principle illustrates:

The theory of bounded rationality states that it is likely for consumers to have perfect information.

The total utility of the consumer diminishes whenever:

According to utility theory, a consumer is in equilibrium when:

When the budget line is just tangent to the highest achievable indifference curve, then _____.

In order to maximize utility, consumers _____.

_____ is the change in total utility that occurs because one more unit of the good is consumed or acquired.

An increase in income _____.

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

If MU_X/ P_X < MU_Y/ P_Y then this consumer: